Tech Brew Ride Home - EA Taken Private

Episode Date: September 29, 2025

The biggest sign yet of the state of the gaming industry, EA is being taken private. DeepSeek’s new model might start a new AI price war. OpenAI announces their parental controls for teen users. And, the Wall Street Journal says debt financing is now playing an increasing role in AI CAPEX buildout. Electronic Arts Goes Private for $52.5 Billion in Largest LBO Ever (WSJ) EA Agrees to $55 Billion Sale in Largest Leveraged Buyout on Record (Bloomberg) EA Buyout Talk Highlights Gaming Struggles as Growth Slows (Bloomberg) DeepSeek Debuts ‘Sparse Attention’ Method in Next-Gen AI Model (Bloomberg) Jaguar Land Rover Gets Government Loan Guarantee to Support Supply Chain; Restarts Production (WSJ) OpenAI Adds Parental Safety Controls for Teen ChatGPT Users. Here’s What to Expect (Wired) Debt Is Fueling the Next Wave of the AI Boom (WSJ) Learn more about your ad choices. Visit megaphone.fm/adchoices

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Google Fi Wireless is not subject to data traffic deprioritization during times of high network usage. Welcome to the TechBrew Ride Home for Monday, September 29th, 2025. I'm Brian McCullough today. The biggest sign yet of the state of the gaming industry, EA is being taken private. DeepSeaks new model might start a new AI price war. OpenAI announces their parental controls for teen users, and the Wall Street Journal says debt financing is now playing an increasing role in AI CapEx buildout. Here's what you miss today in the world of tech.

One of the biggest players in all of gaming EA has agreed to be acquired by Saudi Arabia's PIF Silver Lake and Jared Kushner's affinity partners for $210 per share, taking it private at around a $55 billion valuation. This is not only one of the biggest deals ever in gaming, but it is also apparently the largest leverage buyout on record and represents a 25% premium on EA's October 26th close. It is also yet another bearish sign of the times for the beleaguered gaming industry. Quoting the journal, the transaction consists of $36 billion in equity from the investors and $20 billion in debt financing from J.P. Morgan Chase. Chief executive Andrew Wilson will continue leading EA. The deal is expected to close in the first quarter of

fiscal 2027. EA, which makes video games including FC, formerly known as FIFA and Madden NFL saw its stock slide 17% in one day earlier this year after the company reported soft results for its soccer gaming business. But shares have since rebounded with investors anticipating the release of the latest version of EA's Battlefield First Person Shooter franchise. For Saudi Arabia's public investment fund, the deal marks a continued push into the video game industry. The fund already had a 10% stake in EA in addition to a minority stake in Nintendo and has acquired Scoply, the maker of Monopoly Go and Neantix video game division, which makes Pokemon Go, end quote. And quoting Bloomberg. Founded in 1982, Electronic Arts is one of the world's

largest independent video game publishers after a wave of industry consolidation of the past few years. Activision Blizzard, maker of the Call of Duty shooter games, was acquired by Microsoft two years ago. Going private will remove the distraction of quarterly earnings and investor demands. EA's strength in sports gives the company the predictable revenue that private equity firms like. The company's sports titles, including Madden NFL, accounted for four of the industry's top 10 bestsellers last year, according to the market research firm, Sircana. Most large deals with a foreign investor require some form of government approval. Affinity partners founded by Kushner, the president's son-in-law, during the first Trump administration, is participating in the deal. Affinity is backed by foreign investors, including some from the Middle East, end quote.

And quoting a different Bloomberg piece. Some industry observers worry the move suggests EA executives are looking for an exit because of concerns about the future of the $178 billion video game industry. Growth has slowed significantly following a period of big spending on gaming throughout the 2010s and into 2020 when the COVID-19 pandemic boosted sales. Since then, gamers have tended to stick with old favorites rather than purchasing new titles which can cost up to $80. Electronic Arts is scheduled to release Battlefield 6,

the latest entry in the Redwood City, California-based companies' shooter game franchise on October 10th, and early buzz for the title has been strong. Reese Elliott, a games analyst at Medea Research, wrote in January that, quote, double-digit growth is a fantasy, and the industry will only see slight growth going forward, predicting a 2025 industry growth rate of about 4.6% aligned with inflation.

The console market itself has matured and is no longer a growth one, said Matt Piscatella, senior director at market research firm Circana. Many young players are sticking with older titles, such as Fortnite, Minecraft, and Roblox, quote, sometimes to the exclusion of just about everything else, he said. Electronic Arts generated nearly 75% of fiscal 2025 sales from live service revenue rather than new purchases. That sort of pattern may seem predictable and therefore more appealing for a leveraged buyout, which pays for itself in large part by saddling the company with debt, level said. We're moving away from an era of breaking new ideas to people settling into the same games,

spending money over and over again, he said. The future of the gaming industry itself is uncertain and significant growth cannot be expected, said Naoko Kino, chief executive officer of Kaios Company, a game development company in Tokyo. The game business is, in a sense, a form of gambling, which makes it inherently unstable, end quote. Deepseek has released DeepSeek version 3.2 EXP, and what is interesting is they are saying it built this new model using a new technique called Deep Seek Sparse Attention, which consequently has allowed them to have the price of its tools. So price war roaring its head in AI once again, quoting Bloomberg. The secretive Chinese startup outlined the Deepseek v3.1 EXP platform explaining it uses a new technique. It calls it. as Deepseek sparse attention or DSA, according to a post on its hugging face page. The latest version marked an intermediate step toward our next generation architecture.

The Chinese startup said also indicating it was working with Chinese chipmakers on the model. Deepseek also said it was halving prices on its software tools, joining other Chinese startups and slashing costs to attract users. On Monday, Huawei, the leader in Chinese AI chips, announced its products would support Deepseek's latest model update. DeepSeek has indicated that the newest version of its models support FP8 or Floating Point 8 architecture while it works on supporting BF16. Both are technical terms for the ways in which numbers can be stored on computers for AI and machine learning. FP8, in theory, saves memory and speeds up

calculations. AI models handle millions of numbers, and using smaller formats like FP8 and BF16 balances speed with accuracy and makes it easier to run big models on limited hardware. Though it isn't very precise, FP8 is considered useful for many AI tasks. BF16 or Brain Floating Point 16 is regarded as more accurate for training AI models, end quote. You know my thing about having to have a threshold of newsworthiness in order to cover cyber attacks? Well, this one would be over that line. The UK government has been forced to underwrite a one and a half billion dollar pound loan to Jaguar Land Rover as the carmaker is really, from a cyber attack that has apparently crippled its production for around a month, quoting the journal. The loan will be provided by a commercial bank and is backed by the government's export credit

agency. It will be paid back over five years. Jaguar Land Rover is an iconic British company, which employs tens of thousands of people, UK Treasury Chief Rachel Reeves, said in a statement Sunday, today we are protecting thousands of those jobs with up to one and a half billion pounds in additional private finance, helping them support their supply chain and protect a vital part of the British car industry, she added. The UK automaker, owned by India's Tata Motors, discovered a cyber attack late last month forcing the company to shut down its computer systems

and halt production. The company behind Land Rover, Jaguar and Range Rover models has been forced to repeatedly extend the production shutdown over the past few weeks as it races to restart systems safely with the help of cybersecurity experts flown in from around the globe, the UK's National Cybersecurity Center and law enforcement said. Last week, the company began a gradual restart of its operations, bringing some IT systems back online. It has informed suppliers and retail partners that sections of its digital network is back up and running, and processing capacity for invoicing has been increased as it works to quickly clear the backlog of payments to suppliers. JLR has UK plants in Solihull and Wolverhampton

in the West Midlands, in addition to Halewood in Merseyside. It is one of the UK's largest exporters and a major employer employing 34,000. directly in its UK operations. It also operates the largest supply chain in the UK automotive sector, much of it made up of small and medium-sized enterprises and employing around 120,000 people, according to the government. Labor unions had warned that thousands of jobs in the JLR supply chain were at risk due to the disruption and had urged the government to step in with a furlough plan to support them, end quote. Study and play. Come together on a Windows 11 PC. And for a limited time,

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Visit redbull.com slash bright summer ahead to learn more. See you this summer. Ambition comes in all shapes and sizes. At First Citizens Bank, we roll with your goals because we're built for what you're building. Fit for your ambition for citizens back. OpenAI has launched new chat GPT parental safety controls for users aged 13 to 18, including parental and law enforcement alerts for chats about self-harm or suicide. Quoting Wired, as a whole, the content experience for teens using chat GPT is altered with this update.

Quote, once parents and teens connect their accounts, the teen account will automatically get additional content protections. reads Opening Eyes blog posts announcing the launch, including reduce graphic content, viral challenges, sexual, romantic, or violent roleplay, and extreme beauty ideals to help keep their experience age appropriate, end quote. Under the new restrictions, if a teen using a chat GPT account enters a prompt related to self-harm or suicidal ideation, the prompt is sent to a team of human reviewers who decide whether to trigger a potential parental notification. We will contact you as a parent in every way we can, says Lauren,

Jonah, OpenAI's head of youth well-being. Parents can opt to receive these alerts over text, email, and a notification from the chat GPT app. The warnings parents may receive in these situations are expected to arrive within hours of the conversation being flagged for review. In moments where every minute counts, this delay will likely be frustrating for parents who want more instant alerts about their child safety. Open AI is working to reduce the lag time for notifications. The alert that could potentially be sent to parents by OpenAI will broadly state that the child may have written a prompt related to suicide or self-harm. It may also include conversation strategies from mental health experts for the parents to use

while talking with their child. In a pre-launch demo, the example email's subject line shown to Wired highlighted safety concerns but did not explicitly mention suicide. What the parental notifications also won't include are any direct quotes from the child's conversation, neither the prompts nor the outputs. Parents, however, can follow up with the notification and request conversation timestamps. We want to give parents enough information to take action and have a conversation with their teens while still maintaining some amount of teen privacy, says Jonas, because the content can also include other sensitive information. Both the parents and the teen's accounts have to be opted in for these safety features to be activated.

This means parents will need to send their teen an invitation to have their account monitored, and the teen is required to accept it. The account linkage can also be initiated by the teen. Open AI may contact law enforcement in situations where human moderators determine that a teen may be in danger and the parents are unable to be reached via notification. It's unclear what this coordination with law enforcement will look like, especially on a global scale, end quote. Remember some weeks ago when I did that episode with Paul Kedroski, where we talked about whether or not debt financing could be a sort of existential issue if AI really is a bubble? Well, quoteing the journal. In the initial years of the AI boom, comparisons to the dot-com bubble didn't make much sense. Three years in, growing levels of debt are making them ring a little truer.

Early on, wealthy tech companies were opening their wallets to out-joust each other for leadership and artificial intelligence. They were spending cash generated largely from advertising and cloud computing businesses. There was no debt-fueled splurge on computing and networking infrastructure, like the one that inflated the bubble two and a half decades ago, while big tech companies are still at AI's forefront and are in solid financial shape, a crop of more highly leveraged companies is ushering in an era that could change the complexion of the boom. A few smaller companies most prominently core weave have been relying on creative financing to vault themselves to the AI forefront

for a while. More recently, though, the ambitions of companies such as Open AI are poised to take leverage and mega contracts to a whole new level. Open AI is laying the groundwork for a network of data centers that will cost at least $1 trillion over the next few years. As part of its push, the company signed a $300 billion five-year contract this month under which Oracle is to set up AI computing infrastructure and lease it to OpenAI. To make good on its end of the contract, Oracle has to spend on that infrastructure before it gets paid in full by OpenAI, which means a lot of borrowing. Analysts at Key Bank Capital Markets estimated in a recent note that Oracle would have to borrow $25 billion a year over the next four years. And Oracle is already highly leveraged.

The company had long-term debt of about $82 billion at the end of August, and its debt to equity ratio was about 450%. By contrast, Google Parent Alphabet's ratio was 11.5% in its latest quarter, and Microsoft was about 33%. Oracle and other less well-heeled AI aspirants, such as CoreWeave, have few options other than to borrow if they want to play in the big leagues. Nebius Group, another NASDAQ-listed AI cloud company like Corweave, reached a $19.4 billion deal in September to supply Microsoft with AI computing services and said it would fund the required capital spending through a combination of its cash flow and debt secured against the contract. Investors so far haven't been too concerned.

Oracle's shares shot up after the company revealed a huge expansion of projected revenue, to its Open AI deal, even though it will burn through cash for years to fund it. CoreWeave's shares have more than tripled since the company listed in March, while Nebius rose nearly 50% after news of its Microsoft deal. But there is reason for skepticism about these companies' ability to fulfill their contracts and repay their debts. Numerous recent studies have found AI isn't gaining traction as quickly as its backers suggest. Only 3% of consumers are paying for it, according to one study. Projections of spending on AI data centers reaching trillions of dollars a year within the next few years seem highly optimistic. Despite the hype around the company,

Open AI's position looks tenuous. It would need to grow more than $300 billion of annual revenue in 2030 to justify the spending in vision in the Oracle contract, D.A. Davidson analyst Gil Loria estimates a big rise from the company's current run rate of about $12 billion. $1.A.I. has backing from SoftBank and NVIDIA, which it's pledging to invest as much as $100 billion as the buildout proceeds. That is big, but far from sufficient. A vast majority of Oracle's data center capacity is now promised to one customer, OpenAI, which itself does not have the capital to afford its many obligations, Loria said. Oracle might be able to reduce its risk by proceeding with spending only as it recognizes revenue from OpenAI. But Moody's cited significant

In significant risks in a note this month, pointing to the enormous cost of buying equipment and securing land and electricity, whether these will be financed through traditional debt, leases, or highly engineered financing vehicles, the overall growth in balance sheet obligations will also be extremely large, it said. Moody's in July gave Oracle's credit rating a negative outlook. There is a decent chance that it all works out. Oracle might manage its contracts and debt adeptly, as it has done in the past. Corweave, Nebius, and other players might also usher in a wave of financial innovation that spurs AI's growth, but it is at least equally likely that many of today's massive contracts get postponed or renegotiated because end demand for

AI services doesn't grow in line with the infrastructure buildout. Contracts could be transferred to lawyers say if Open AI falters, Oracle could lease its infrastructure to another more stable company, assuming the deal allows for that. Such a reckoning wouldn't necessarily be a death now for Oracle and its leverage peers, but it would be a formidable test for an emerging financial model for AI, one that looks bubblier by the day, end quote. If you, like me, use podcasts or audiobooks to fall asleep, I can report that that new turn off the audio when you fall asleep feature on Apple AirPods works pretty well so far as I can tell. Talk to you tomorrow. Yamava Resort and Casino at San Manuel is California's number one.

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